If Greece leaves the euro, this will be a rolling crisis, not one that ends next Monday.» Read More
I noted last week that this week is the biggest of the year for IPOs. Fourteen are expected to price, and more than $2 billion is expected to be raised.
But one space that has escaped market watchers' attention is the secondary market, which dwarfs the IPO market.
For example, there were 10 secondaries announced last night. Think about that: 10.
And here's what's important: Much of the proceeds are being used to buy things.
That's right—to buy things. Companies. Hotels. Pipelines. Retirement centers.
Not surprisingly, many are in the energy and real estate fields.
"These are people with very deep interests in their field, and they know when assets in the their fields are cheap," David Menlo of IPOfinancial.com told me. He added that it is generally cheaper to buy than to grow organically.
"To buy a pipeline, for example, is a tremendous capital expenditure. Building new hotels, or senior citizen centers, is more of a risk than buying what's already there because you have a track record with the existing properties. There's verifiable cash flows."
European markets went into the close at the highs for the day as yet another comical round of "What? Me, worry?" plays out in Europe.
The Greeks sent the wrong proposals to the negotiations?
No problem! They eventually got the right one out! What's a day or two when you're on the verge of default?
No agreement because the finance ministers didn't get the correct proposals in time to examine the details?
No problem! The summit of eurozone heads of state will still take place this evening.
The eurozone ministers also can't make a deal because there is no technical agreement?
No problem! The meeting will be used to prepare the ground for another Eurogroup meeting later this week.
We have a problem with the details of the agreement and can't come to an agreement at the Eurogroup meeting?
No problem! There's another meeting, somewhere. And another extension...
Is it safe to go back into Europe again? Euro leaders are dangling the ultimate carrot: a third Greek bailout deal.
European stocks are in sold rally mode, with most bourses up 1 to 2 percent, as EU leaders are scheduled to meet at 1 p.m. ET to attempt to hash out a deal with Greece. Bond yields are down in Greece, Italy, and Spain, and up slightly in Germany and France.
The Greek leadership has presented a slightly different proposal in an effort to end the stalemate. Whether it is good enough is unclear. There is less emphasis on cuts in pension spending and increases in value-added taxes and more on closing tax loopholes and raising taxes on corporate profits. Greece is also reportedly offering to raise the retirement age to 67, well above the average retirement age of 63 for men and 59 for women.
If a deal is reached, there have been reports the leaders are willing to discuss debt relief as part of a third bailout.
If there is a deal on Greece, even a "kick the can" deal that would extend the bailout for a few months ahead of a new bailout deal, will that cause a resumption of the European stock rally that started in January and fizzled in April on Greek exit fears?
The initial response would seem to support the idea. Germany is more than 10 percent off its April highs, but it has rallied about four percent since the bottom on Thursday on just such hopes. The Vanguard FTSE Europe ETF, a basket of European stocks, has rallied roughly 2 percent in that time period.
Perhaps more importantly, this will reinforce the idea that central banks will always bail out market participants.
The IPO market is finally starting to get going, and next week will be the biggest week of the year. Roughly 14 companies are slated to go public and will likely raise north of $2 billion.
It's been a lackluster start. There's been 82 IPOs this year, about 40 percent below where we were last year.
Why is the market finally heating up? The single most important factor is positive returns for investors. With the overall market relatively healthy, IPOs have also done well. The Renaissance Capital IPO ETF, a basket of roughly 60 recent IPOs, is approaching its April historic high.
For others, there may be a simple calculation that now is the time to take the company public, before the Fed begins raising rates later this year.
The upshot: June could be one of the biggest months for IPOs in years. Perhaps as many as 34 will price, the most in a single month since 1999.
"It's like somebody pressed the IPO reset button," Kathleen Smith from Renaissance Capital said.
What's impressive about next week's crop of IPOs is the breadth of the offerings. There's something for everyone.
Why aren't the markets worried about Greece?
I have said for some time that the consequences of Greece leaving the euro zone may be far greater than anyone realizes, but the market thinks otherwise.
The German stock market is rallying today, and is flat on the week. European markets are down only about 1 percent for the week. European bond yields are up, but not too dramatically. The S&P 500 is up 1.3 percent this week, and the CBOE Volatility Index is near the lowest levels of the year.
I've had many discussions with analysts and traders about this seeming indifference. Opinions vary, but there are four factors that show up in everyone's list to explain the phenomenon:
1) Fatigue: After five years of crisis, everyone is over it.
2) Complacency: Most feel that a deal will be made, even if it is just a "kick the can" deal.
3) No contagion: Traders believe the European Central Bank when it said it would do "whatever it takes" to keep the euro together.
4) Containability: Finally, even if Greece leaves the euro, many have now convinced themselves the damage could be contained. Peripheral bond yields are only modestly elevated, with Spanish 10-year yields, for example, is at 2.24 percent.
Stocks rallied and Treasury yields declined as Janet Yellen maintained a dovish outlook in her press conference, emphasizing that even if the Fed raises rates it will be "gradual."
The Fed statement was almost a carbon copy of the April 29 statement. The only change came in the first paragraph on the economic outlook.
The Fed has:
1) modestly upgraded the economic outlook: "has been been expanding moderately after having changed little during the first quarter."
2) modestly upgraded the assessment of the labor market: "The pace of job gains picked up while the unemployment rate remained steady."
3) upgraded its view on housing: "Growth in household spending has been moderate and the housing sector has shown some improvement"
4) left in the key inflation line: "The Committee continues to monitor inflation developments closely."
5) left in the key statement on fed funds rate: "economic conditions may, for some time, warrant keeping the target federal funds rate below levels the Committee views as normal in the longer run."
6) downgraded their 2015 GDP forecast to 1.8-2 percent from 2.3-2.7 percent in March.
What happened to the recovery in oil stocks?
The pricing and volume action are telling me that investors are doubting the hoped-for 2016 recovery in production volumes.
Yesterday, Chevron hit a three-year intraday low.
The main Energy ETF, a basket of the energy stocks in the S&P 500, has staged three separate attempts to rally since hitting lows in December and January and is again fading, essentially moving straight down for the past six weeks. Volumes have also faded.
And the rally in crude has stalled. Since bottoming in the low $40s in early March, West Texas Intermediate, the main U.S. benchmark, has staged an impressive rally (over 40 percent) to trade between $58 and $61, but has been stuck in that range for the past six weeks as well.
Here's the problem: Everyone bought energy stocks aggressively in early 2015 on the theory that oil production would bounce back in 2016.
It's human nature. The optimists are focusing on a bounce.
But many are starting to realize that, while oil prices may stage a modest comeback, oil production may not, at least any time soon.
The trading day begins again and will end later today, but Greece goes on forever.
How fed up is the trading community with Greece? I attended a hedge fund "idea dinner" last night, where roughly 15 investment professionals exchanged trading ideas, both long and short.
When it came to the subject of Greece, most just shrugged. A surprising number thought it would be good in the long run if Greece defaulted and left the euro zone.
But most didn't want to talk about it.
That about summarizes the trading community attitude: so fed up they don't want to talk about it anymore. So fed up they seem to have run out of things to say about it.
"Volumes are terrible and traders are fed up w/ Greece," one hedge fund friend messaged me. "If they get kicked out...maybe that's a negative event, but who knows?"
Here's how confused things are on Greece: Traders aren't even sure what resolution would be best for the markets.
"The market isn't trading worse because there is a firm belief that whenever there is an event driven by a policy decision that decision will go the way the market wants, even if the market doesn't know what it wants...like Greece," one trader told me.
Standard Pacific will undertake a 1-for-5 reverse stock split. After the split, Ryland shareholders will receive 1.0191 shares of Standard Pacific stock for each Ryland share.
Though billed as a "merger of equals," Ryland will hold a 41-percent stake while Standard Pacific will have a 59-percent stake.
Mergers of home builders are fairly rare events. The last real merger of size in this space was between PulteGroup and Centex in 2009, though in 2013 Tri Pointe Homes acquired the land assets of Weyerhaeuser.
Why are mergers fairly rare in the home building space? Builders don't like to buy each other because what they really want is the land. That's what is scarce. So why pay a premium for operations when all they want is land? Just buy the land.
Still, in some circumstances, the deal would make sense when you need scale fast. You get the purchasing power of a bigger guy. More negotiating power with subcontractors.
It would also make sense if you thought the home building market was in for a period of slow growth.
Hedge fund managers like Paul Singer, Dan Loeb and Seth Klarman have been big backers of gay marriage in recent years.
Investors believe the global economy is positioned to weather Greece's potential exit from the euro zone, Jason Trennert said.
The BIS finds the global economy's reliance on monetary policy "deeply troubling," the FT reports.